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Netflix, Inc. (NFLX) Message Board

  • singhlion2001 singhlion2001 Dec 4, 2012 4:19 PM Flag

    BIGGEST FRAUD CONMAN PROVEN CRIMIANL THUG REED HASTINGS HAS PUT WORLDCOM/ENRON TO SHAME WITH AN EMPTY SHELL INSOLVENT SCAM POOP WIPE PAPER FOR LOOT IN BILLIONS

    Biggest fraud conman proven crimianl thug reed hastings has put worldcom/enron to shame with an empty shell insolvent scam poop wipe paper for loot in billions

    no funds at all to pay...............

    open challenge in usa to debate this scam on national tv brodcast

    hang s.e.c. Crimianl watch rats ina public square asap to stop pension loot blood savings of 99% working class in usa

    Sentiment: Strong Sell

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Tuesday, December 11, 8:08 AM The Netflix (NFLX) children's portal could be a double-edged sword, according to some media analysts. The concern is that the company's streaming flow of children's content could undermine the popularity of Disney and Viacom shows, forcing those companies to increase content fees or even pull the plug on selling to Netflix.

      Sentiment: Strong Sell

    • S.e.c. Criminal watch parasites you have helped rape america 99% working class by colluding with fraud private finra financial so called watch terrorists

      all the commonsense real accounting rules eliminated and pure fraud accounting introduced and entire system is now rigged against 99% to transfer their blood sweat savings/real estate and pensions into pockets of 1 %.you criminal mf criminals have almost completed your mission.
      ------------------------
      i have open challenge outstanding since 2011 to debate netflix scam ponzi play book on national television in front of usa working middle class for all you watch parasites/ bankster terrorists/all academia/high treason criminal rulers
      ----------------------------
      netflix debate will show to 99%, how criminal bankster financial terrorists/corporate thugs like reed hastings can loot $20b+ in less than 3 years with an insolvent balance sheet on usa fraud street casino from working class 99% pension blood sweat funds. Also reveal crystal clear , how you criminal parasites serve your financial terrorists bankster and corporate thug masters?

      Sentiment: Strong Sell

    • Monday, July 9, 2012
      Fools Rush In After Netflix CEO Boasts on Facebook?
      By EconMatters

      The wild ride of Netflix shares continues. After plummeting from above $300 a share to around $60 all within the past year mostly due to poor management decision. Netflix shares spiked more than 21% in one week to close at $81.89, the highest level in two months, on Friday July 6.

      Chart Source: Yahoo Finance, July 6, 2012

      Netflix is not scheduled to report its full earnings for Q2 until after the market close on July 24. Rather, this latest renewed enthusiasm came primarily from an upbeat Facebook update by CEO Reed Hastings:
      "Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we'll blow these records away."
      The stock also got a bump after Citigroup reiterated a 'buy' rating on Netflix shares, calling the price "highly reasonable" with a target of $130 a share, about 56% from the current level. Judging from the price movement, the unexpected buying action most likely also resulted a massive short squeeze. (Hastings' Facebook page has almost 206,000 subscribers.) Nevertheless, Netflix shares are still down 26% in the last three months and off 72% in the past year.

      Netflix has been beefing up its program offerings by acquiring exclusive content to stay competitive with rivals like Amazon (AMZN), Apple (AAPL), Hulu and Comcast (CMCSA). Bloomberg reports that Netflix said in January that viewing in Q4 of 2011 totaled just over 2 billion hours. So this new figure of one billion viewing hours in June alone does seem to suggest a faster growth rate for Netflix streaming service.

      Nevertheless, since Netflix streaming service charges a flat fee per month, at least part of the increase in total hours could come from an increase of viewing hours per subscriber, which is actually bearish for the stock. So the one billion monthly streaming hours reflects more the content and marketing strength of Netflix, rather than a compelling story of the bottom line or growth in a very competitive market sector.

      Fundamentally, a more troubling picture also emerges with a look at the company's balance sheet. For the quarter ending March 31, 2012, the company has $804.5 million in cash, but $1.45 billion in current liability, with a scant quick ratio of 0.6, and a current ratio of 1.4, barely above the minimum threshold of 1.

      Then there is also this $3.7 billion off-balance liability buried deep in the company's 10Q filing. Based on a Bloomberg review, these off-balance liabilities are the minimum estimates (i.e., the actual could be a lot higher) for payments due for future contents already under contracts. Out of the $3.7 billion, $3.1 billion will come due within three years. Including this $3.7 billion, Netflix Debt-to-Capital would balloon to 618% from the current 60.3%!

      From a valuation standpoint, since profit will likely get squeezed pretty hard with the company's ambitious international expansion plan, Netflix stock looks over-valued with a current forward P/E of 38.63. For comparison purpose, the same ratio for Nasdaq 100 is 13.78, 12.95 for S&P 500, and under 12 for both Apple and Google. I guess Netflix share price is only "highly reasonable," as described by Citigroup, if you compare it to the high flying stocks like Amazon, which has a forward P/E of 87.67.

      Chart Source: Ycharts July 6, 2012

      For now, Netflix does appear to be the leader of the video-on-demand (VOD) pact primarily benefiting from the first mover advantage. However, competition is becoming fierce and cut-throat. It looks like cable companies are getting anxious to punish Netflix for its sins of free-riding on their expensive fiber optic network. For example, in a clear declaration of war against Netflix, Comcast recently announced its intention to offer a similar service as Netflix, albeit with a much weaker library, for $5 per month, and many free movies to its Xfinity subscribers. Amazon Prime offers streaming video in addition to expedited shipping for $79 annually. Not to mention sooner or later, tech giants like Apple and Google (GOOG) will start throwing cash around, and get more aggressive in this space as well.

      Ultimately, "content is king" in this sector. So it is doubtful Netflix would keep getting exclusive contents, and maintain its lead in the long run, considering most of Netflix major rivals are equipped with much deeper pockets.

      The self-congratulatory social media update from the CEO seems a bit pre-mature to suggest an entry into the stock. We maintain our recommendation to stay away from this stock, as there are more compelling stocks to invest in with either better growth, and/or value prospect. For investors got in during the past week, instead of holding to Citigroup's bullish-biased $130 target, it'd better to gradually cash out, since the stock most likely will have higher volatility going into the earnings next month.

      Sentiment: Strong Sell

    • ZEROHEDGE:Netflix' CEO Receives Wells Notice, SEC Alleges "Reg FD" Violation
      The antics of the world's most cartoonish CEO, that would be NFLX' Reed Hastings of course, who once upon a time posted on Seeking Alpha telling naysayers not to short him, bro, (only to continue sell his company's stock even as NFLX proceeded to use corporate money to buyback its own stock in the $200+ area), before promptly collapsing to multi-year lows, has finally been called to task by none other than that other most cartoonish of organizations: the SEC, which is now desperate to clean up its image as the bulk of the most co-opted personnel are jumping ship, and will likely end up in various Wall Street companies.

      Sentiment: Strong Sell

    • FRAUD S.E.C. PARASITES;Stock Markets That Flummox Masses Do No One Any Good
      by singhlion2001 . Dec 6, 2012 3:21 PM . Permalink
      Stock Markets That Flummox Masses Do No One Any Good
      By Amy Butte Dec 2, 2012 3:30 PM PT

      Want to know a dirty little secret? Our stock markets no longer work.
      They have grown so complex, fragmented and opaque that they don’t serve their stated purpose. Rather than a place where individual and professional investors can put a value on shares and where companies go to raise capital, the markets today look more like a video game. The trouble is, it’s one where only a few understand all the rules.
      Excessive complexity has costs. Individuals, wary of an uneven playing field, may choose not to invest. Long-term investors, frustrated by a market that doesn’t value their participation, may take their trading to overseas venues or alternative private networks. Companies, unaccustomed or unprepared for the amount of work needed to go public, may look for other forms of capital, such as debt or private equity.
      Capital markets work best when all the participants -- investors and companies -- come together in one place. Although everyone may not have the same interests, at least there is an understanding that a common set of rules exists.
      Today, you need a super computer or a doctorate to understand the rules of the stock market. So it isn’t surprising that there is a perception that you, your neighbors and others have no chance of getting a fair price in the market. For example, why go to a store if you think there are two prices -- one for the regular person and one for those with inside knowledge?
      Old Days
      Several forces have conspired to get us where we are today. In the old days, it was pretty simple. There were a few types of trades and only a couple of places where you could execute them. There were orders at the market price, those with price limits and good-till-canceled orders; you could go long in a stock, betting on its appreciation, or short, expecting it to fall; and you knew there was an investor on the other side of the transaction, or a market maker (a buyer and seller of last resort) if there wasn’t.
      Today, there are more than 100 order types -- and when you add on variables such as time of day, participant designation and session type, it multiplies very quickly.
      For example, the NYSE Arca Order Type page lists more than 30 classifications (before accounting for all the variables). One kind of order adds liquidity to the market, another might be filled or immediately killed, still another can have two different price components, and so on. Larry Tabb, an equity- market expert and chief executive officer of Tabb Group LLC in Westborough, Massachusetts, estimates that there are more than 100 order types for each of the 13 U.S. exchanges, not to mention the 50 or so dark pools, where trades are executed in private venues.
      In 2004, when the New York Stock Exchange first looked into changing the order-handling rules, the objective was to integrate the existing trading environment with new technology. The market would be faster and more efficient, one that was fair to the individual investor and attractive to larger participants. In other words, an even playing field that moved faster and cost less.
      But the Securities and Exchange Commission, in its effort to be viewed as independent from the NYSE and promote competition among the different exchanges, permitted multiple exceptions to the rules. In other words, small operators could enter the market with different order-handling procedures. As long as their volume remained at less than 10 percent of the total trading in a security, alternative marketplaces could operate with limited regulation.
      Order Flow
      In addition, brokerage houses used their influence to move more order flow away from the stock exchanges and to their own private trading sessions, or pools, of securities. Think of it as a place to go for a “first look” or “private sale.” It was less expensive and gave them a captive audience for their best customers. Order flow no longer went straight to one centralized marketplace. This reduced transaction fees and increased efficiency for those that had access to it. Unfortunately, it was only the beginning of fragmentation.
      Technology advances continued, fueling the rise of high- frequency trading, which exploits discrepancies in prices of different exchanges that might last for less than a 1,000th of a second. Order-handling rules became so complicated that few people could understand what each change meant. By trying to be more technology-friendly and open to all participants, the exchanges and the SEC lost control. We now have hundreds of mini-markets within markets.
      The pendulum has swung too far. The exchanges are fighting for their survival. They must react to the demands of their best customers -- large brokerage houses and high-frequency-trading firms -- and have less influence than they did a decade ago to change the markets. In 2004, more than 80 percent of market volume was controlled by less than 20 percent of the participants. Today, high-frequency traders alone control more than 50 percent of the volume.
      By allowing markets to descend into a mire of complexity, the SEC has abdicated its core values and mandate, which is “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation,” according to the mission statement on the agency’s website.
      When only firms with the most advanced technology have an advantage, the markets aren’t fair. When market participants can no longer understand order types, the markets aren’t orderly. When there is no cost to using capacity without making actual trades, as high-frequency firms do, the markets aren’t efficient.
      The SEC needs to simplify the markets. It could start by mandating a limit to the types of orders allowed, say, no more than 10. The agency also should draft a rule book that we can all read and understand.
      To contain the explosion in trading volume, the SEC should require that traders pay a transaction fee for both trades and capacity. Right now, there is no limit to the number of “looks” at the order flow for high-frequency traders, who then can craft their strategies with advance knowledge of what other participants are doing. Such fees alone would help to return the markets to a place where capital formation, not just high-speed arbitrage, is the primary objective.
      Here’s one more suggestion: Require that the SEC be able to explain market structure and order types to a high-school senior. It isn’t a test that the agency can afford its students to fail.
      (Amy Butte is the former chief financial officer of the New York Stock Exchange. The opinions expressed are her own.)
      Read more opinion online from Bloomberg View.

      Sentiment: Strong Sell

    • s.e.c criminal dogs ..much more need to be investigated

      Sentiment: Strong Sell

      • 1 Reply to singhlion2001
      • HEY S.E.C. CRIMINAL WATCH PARASITES

        MUCH MORE NEED TO BE INVESTIGATED

        DON'T FOOL US WITH US ONE JUST FB COMMENT WELLS NOTED

        PROVEN MF CRIMINAL THUG REED HASTINGS SCAM GANG NEED TO URGENTLY CREATE FRAUD NEWS SPINS TO STOP THE CRASH AND BURN OF FRAUD BUBBLE..LIQUIDITY DRIED OUT

        RED ALERT IN USA: FRAUD LOOT IN BILLIONS AND S.E.C. CRIMINALS STILL PROTECTING CRIMINAL REED HASTINGS SCAM GANG
        And providing all weapons to keep the fraud bubble loot going

        open challenge in USA to debate insolvent netflix insider scam with fraud street crime partners
        Ouch! The Netflix Price-Change Hangover [View article]
        Reed Hasting's is a carnival barker, a mountebank, a flim-flam man, a charlatan and a confidence man. The CFO left the company in January, because he was aware of the fake accounting at NFLX, the lies and the false hype. The Head of investor relations left 3 months ago, because she could no longer lie, about the companies activities and accounting. Both left before any investigation into accounting, or investigation into the manipulation of the stock by hedge funds begins. Goldman Sachs, Morgan Stanley. JP Morgan, Piper Jaffray and many other financial institutions have been colluding to manipulate this stock thru proprietary trading in their hedge funds. Goldman Sachs picked NFLX as their latest Ponzi Scheme, because Reed Hastings is just the perfect Machiavellian con-man. Lloyd Blankfein And Reed Hastings are as thick as thieves. It was Goldman Sachs that forced Facebook executives to add Reed Hasting to their Board of directors, to manipulate the stock price. Reed Hasting is a false Messiah, in league with Goldman Sachs, deceiving Americans, and The indolent regulators who have been paid off by Goldman Sachs. The SEC directors are bribed by Goldman not to do their job, with promises of $4 million a year jobs after they leave the SEC, at banks, the very banks they are supposed to regulate. The SEC is corrupted and compromised by Goldman Sachs, "the Great Deceiver"
        --------------------
        All Whistles blown in USA but MARY SCHAPIRO/ROBERT KHUZAMI/ROBERT COOK refuse to stop the fraud but provide full protection and block my Caller ID and Front Desk asked to haras me and block calls going into their Voice Mails
        Important Instructions:

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        Sentiment: Strong Sell

    • where is FBI? CRIMINAL DIVISION AT DOJ???

      Sentiment: Strong Sell

    • Wedbush Securities Michael Pachter said he doubts the Disney films will attract enough subscribers to offset the expense.
      "These costs are going to sink Netflix," he said.
      Pachter has been urging investors to sell their Netflix stock because he believes the company will either lose money or post puny profits for the years to come.
      Netflix's rising costs for Internet video rights have emerged as a major source of concern as the company's earnings have dwindled during the past year. The company, which is based in Los Gatos, Calif., already has warned that it may record a loss for the last three months of 2012, which would be its second quarterly loss of the year. Depending on the size of the potential fourth-quarter setback, Netflix could finish this year with its first annual loss in a decade.
      Even before signing the Disney deal, Netflix owed $5 billion in Internet video licensing fees during the next five years, including $4.5 billion due before the end of 2015. Netflix's annual revenue this year is expected to total about $3.6 billion.
      Wible, the Janney analyst, said Netflix may have wanted to strike a deal with Disney several years before the movies can be shown on its service to bolster investors' confidence in the company. That, he said, could give Netflix a better chance to sell bonds or stock to raise more money to pay Disney and other studios for Internet video rights.
      "The biggest uncertainty is whether Netflix will use this as an excuse to raise capital," Wible said.
      Starz played down the loss of the Disney rights. In a statement, Starz said it would now have more money to invest in developing original TV series. Netflix also has been financing exclusive episodic programming and had similar played down its loss of Starz when that deal expired in February.
      After Disney defects to Netflix, Starz will still hold the first-run rights to films released by Sony's stable of movie studios That deal applies theatrical releases through 2016 from Columbia, TriStar, Screen Gems and several other Sony-owned studio.
      Liberty Media plans to spin off Starz into a separate, publicly traded company early next year.
      ———

      Sentiment: Strong Sell

    • Netflix (NFLX - UNDERPERFORM): A Change of Heart? Netflix Negotiates Exclusive Content Deal with
      Disney, Comes Only Months after Dismissing Starz; Expect a Lofty Price Tag

      Price: $86.65
      12-Month Price Target: $45

      • On Tuesday, Netflix and The Walt Disney Company (“Disney”) announced an exclusive
      multi-year content licensing agreement that will allow Netflix’s domestic streaming subscribers to
      watch first-run live-action and animated feature films during the pay TV window beginning with
      the 2016 feature film slate. The agreement with Netflix replaces Disney’s current agreement with
      Starz for theatrical releases through 2015. Netflix will also receive direct-to-video new releases
      beginning in 2013 under the terms of the agreement. In addition, Netflix will receive older catalog
      movies, including “Alice in Wonderland” and “Dumbo.” Financial terms of the agreement were not
      disclosed, but we suspect that the deal will require Netflix to pay $250 million or more per year,
      and likely escalates to as much as $500 million per year.
      • In our view, the market’s positive reaction to Tuesday’s announcement (Netflix shares
      closed up 14% on Tuesday) was unwarranted, as the exclusive nature of the deal was highly likely
      to involve a steep price tag. The exclusive nature of the deal for premium Disney content
      implies that Netflix outbid all other interested parties, and necessarily means that Netflix paid
      more than Starz has paid for such content in the past. In its most recent financial statements,
      Starz disclosed annualized programming expenses of almost $660 million based on the September
      quarter figure, implying that roughly $330 million was paid to Disney (the deal involves exclusive
      rights to Disney and Sony film content in the pay TV window), and we estimate that at least 2/3 of
      this figure was for more recent movies. In a note from September 2011, we estimated that Starz, had
      sought as much as $350 million annually from Netflix to renew their earlier deal. However, Netflix
      apparently balked at the price, and the deal expired earlier this year, resulting in Netflix’s
      losing roughly 25% of its “newish” content. We think Netflix paid at least $225 – 250 million
      annually for the Disney content, and believe that the starting point could be as high as $300
      million, with likely escalator clauses built into the agreement. The eventual annual price tag
      could easily exceed this range if Netflix is able to attract a meaningful number of new domestic
      streaming subs over the next few years.
      • In addition, content availability is heavily back-end loaded. Although Netflix will likely
      add many direct-to-video releases and older film content over the next year or so, the most highly
      valued content will likely be unavailable before 2017. Over the near term, we expect increasing
      competition from Amazon and Verizon to challenge subscriber growth, and we expect limited
      profitability (Netflix domestic profits are expected to be reinvested into international expansion
      for the foreseeable future). It is impossible to forecast the impact that premium feature film
      content will have on Netflix subs beginning in the latter half of this decade, but it is easy to
      forecast a sharp upturn in content costs. In any case, we think that the likely high price tag for
      Disney content makes Netflix an exceedingly unattractive acquisition candidate, and think that a
      sharp uptick in content costs in the latter half of the decade will challenge Netflix’s
      profitability for the term of the Disney contract. In our view, Netflix will likely never generate
      significant profits, and a costly content deal will trigger substantial negative leverage should
      the company see subscribers defect to competitive services offered by Amazon and Verizon.
      • Netflix’s commitment to an expensive long-term content deal with Disney is at odds with
      comments made by Netflix management in the Q4:11 Investor Letter, released roughly one month
      before the Starz deal expired. At that time, management stated that the Disney content remaining
      under the deal accounted for a very small percentage of viewership: “the only significant loss
      (with the expiration of the Starz deal) is the current 15 Disney output titles, such as “Toy Story
      3” and “Tangled,” which currently constitute about 2% of our domestic viewing.” At the time, we
      speculated that management had been somewhat disingenuous in its dismissal of Starz, and that
      losing some of Netflix’s most appealing movie content was similar to losing a favorite cable
      channel, likely prompting some subscribers to look elsewhere. We are surprised that investors
      accepted management’s dismissal of the value of Starz content earlier this year, yet are willing to
      reward management a few months later when the company chooses to pay approximately the same amount
      that they rejected for only half of the Starz content.
      • Due to the steep long-term price tag of the Disney deal, the back end-loaded
      nature of content availability, and Netflix’s unclear financial performance over the next few
      years, we view Tuesday’s announcement as a short-term fix to recent pressure on the company’s
      shares. Netflix shares have been negatively impacted by management’s seeming refusal to work with
      investor Carl Icahn, culminating in the recent adoption of a shareholder rights plan, and
      speculation about the prices and plans to be offered by Redbox Instant by Verizon, reportedly
      including cheaper streaming-only ($6 per month) and hybrid ($8 per month with four Redbox rental
      nights) plans.

      Wedbush Securities does and seeks to do business with companies covered in its research reports.
      Thus, investors should be aware that the firm may have a conflict of interest that could
      affect the objectivity of this report. Investors should consider this report as only a single
      factor in making their investment decision. Please see page 3 of this report for analyst
      certification and important disclosure information.

      DISCUSSION (Continued)

      • Ultimately, we think that deals such as the Disney deal could spell doom for Netflix.
      The company offered Starz content from 2007 – 2011 and grew subscribers each year, then lost the
      content in 2012 and saw its domestic subscriber growth slow. We think that management’s band aid
      in restoring half of Starz content at a steep price will limit profitability once the deal kicks
      in, and believe that the restoration of the content will come too late to stem the inevitable
      slowing of subscriber growth. We expect Netflix domestic streaming subscriber growth to slow to a
      crawl in 2013 and beyond, and do not think that a content deal commencing in
      2017 will come soon enough to stimulate growth. Once growth stalls, we expect Netflix’s share
      price to retreat to far more reasonable levels.
      • Perhaps more importantly, a long-term and expensive content deal makes Netflix less
      attractive to potential acquirers.
      While we never expected any serious offers, Netflix’s cost structure limits the ability of a
      prospective suitor to achieve synergies, and limits the potential for any serious offers.
      • Maintaining our UNDERPERFORM rating and 12-month price target of $45. We value domestic
      streaming at $15, domestic DVD at $20, and assign a speculative $10 option value to international
      streaming. Our price target is at risk if domestic streaming growth slows more than we have
      modeled, or if the domestic DVD segment loses more subscribers than we currently have modeled.
      • Risks to the attainment of our share price target include: a sudden increase in subscriber
      growth, declining competition from other movie rental competitors, lower than expected costs for
      content, technology development and deployment, and improving macroeconomic factors.

      Sentiment: Strong Sell

    • Netflix (NFLX - UNDERPERFORM): A Change of Heart? Netflix Negotiates Exclusive Content Deal with
      Disney, Comes Only Months after Dismissing Starz; Expect a Lofty Price Tag

      Price: $86.65
      12-Month Price Target: $45

      • On Tuesday, Netflix and The Walt Disney Company (“Disney”) announced an exclusive
      multi-year content licensing agreement that will allow Netflix’s domestic streaming subscribers to
      watch first-run live-action and animated feature films during the pay TV window beginning with
      the 2016 feature film slate. The agreement with Netflix replaces Disney’s current agreement with
      Starz for theatrical releases through 2015. Netflix will also receive direct-to-video new releases
      beginning in 2013 under the terms of the agreement. In addition, Netflix will receive older catalog
      movies, including “Alice in Wonderland” and “Dumbo.” Financial terms of the agreement were not
      disclosed, but we suspect that the deal will require Netflix to pay $250 million or more per year,
      and likely escalates to as much as $500 million per year.
      • In our view, the market’s positive reaction to Tuesday’s announcement (Netflix shares
      closed up 14% on Tuesday) was unwarranted, as the exclusive nature of the deal was highly likely
      to involve a steep price tag. The exclusive nature of the deal for premium Disney content
      implies that Netflix outbid all other interested parties, and necessarily means that Netflix paid
      more than Starz has paid for such content in the past. In its most recent financial statements,
      Starz disclosed annualized programming expenses of almost $660 million based on the September
      quarter figure, implying that roughly $330 million was paid to Disney (the deal involves exclusive
      rights to Disney and Sony film content in the pay TV window), and we estimate that at least 2/3 of
      this figure was for more recent movies. In a note from September 2011, we estimated that Starz, had
      sought as much as $350 million annually from Netflix to renew their earlier deal. However, Netflix
      apparently balked at the price, and the deal expired earlier this year, resulting in Netflix’s
      losing roughly 25% of its “newish” content. We think Netflix paid at least $225 – 250 million
      annually for the Disney content, and believe that the starting point could be as high as $300
      million, with likely escalator clauses built into the agreement. The eventual annual price tag
      could easily exceed this range if Netflix is able to attract a meaningful number of new domestic
      streaming subs over the next few years.
      • In addition, content availability is heavily back-end loaded. Although Netflix will likely
      add many direct-to-video releases and older film content over the next year or so, the most highly
      valued content will likely be unavailable before 2017. Over the near term, we expect increasing
      competition from Amazon and Verizon to challenge subscriber growth, and we expect limited
      profitability (Netflix domestic profits are expected to be reinvested into international expansion
      for the foreseeable future). It is impossible to forecast the impact that premium feature film
      content will have on Netflix subs beginning in the latter half of this decade, but it is easy to
      forecast a sharp upturn in content costs. In any case, we think that the likely high price tag for
      Disney content makes Netflix an exceedingly unattractive acquisition candidate, and think that a
      sharp uptick in content costs in the latter half of the decade will challenge Netflix’s
      profitability for the term of the Disney contract. In our view, Netflix will likely never generate
      significant profits, and a costly content deal will trigger substantial negative leverage should
      the company see subscribers defect to competitive services offered by Amazon and Verizon.
      • Netflix’s commitment to an expensive long-term content deal with Disney is at odds with
      comments made by Netflix management in the Q4:11 Investor Letter, released roughly one month
      before the Starz deal expired. At that time, management stated that the Disney content remaining
      under the deal accounted for a very small percentage of viewership: “the only significant loss
      (with the expiration of the Starz deal) is the current 15 Disney output titles, such as “Toy Story
      3” and “Tangled,” which currently constitute about 2% of our domestic viewing.” At the time, we
      speculated that management had been somewhat disingenuous in its dismissal of Starz, and that
      losing some of Netflix’s most appealing movie content was similar to losing a favorite cable
      channel, likely prompting some subscribers to look elsewhere. We are surprised that investors
      accepted management’s dismissal of the value of Starz content earlier this year, yet are willing to
      reward management a few months later when the company chooses to pay approximately the same amount
      that they rejected for only half of the Starz content.
      • Due to the steep long-term price tag of the Disney deal, the back end-loaded
      nature of content availability, and Netflix’s unclear financial performance over the next few
      years, we view Tuesday’s announcement as a short-term fix to recent pressure on the company’s
      shares. Netflix shares have been negatively impacted by management’s seeming refusal to work with
      investor Carl Icahn, culminating in the recent adoption of a shareholder rights plan, and
      speculation about the prices and plans to be offered by Redbox Instant by Verizon, reportedly
      including cheaper streaming-only ($6 per month) and hybrid ($8 per month with four Redbox rental
      nights) plans.

      Wedbush Securities does and seeks to do business with companies covered in its research reports.
      Thus, investors should be aware that the firm may have a conflict of interest that could
      affect the objectivity of this report. Investors should consider this report as only a single
      factor in making their investment decision. Please see page 3 of this report for analyst
      certification and important disclosure information.

      DISCUSSION (Continued)

      • Ultimately, we think that deals such as the Disney deal could spell doom for Netflix.
      The company offered Starz content from 2007 – 2011 and grew subscribers each year, then lost the
      content in 2012 and saw its domestic subscriber growth slow. We think that management’s band aid
      in restoring half of Starz content at a steep price will limit profitability once the deal kicks
      in, and believe that the restoration of the content will come too late to stem the inevitable
      slowing of subscriber growth. We expect Netflix domestic streaming subscriber growth to slow to a
      crawl in 2013 and beyond, and do not think that a content deal commencing in
      2017 will come soon enough to stimulate growth. Once growth stalls, we expect Netflix’s share
      price to retreat to far more reasonable levels.
      • Perhaps more importantly, a long-term and expensive content deal makes Netflix less
      attractive to potential acquirers.
      While we never expected any serious offers, Netflix’s cost structure limits the ability of a
      prospective suitor to achieve synergies, and limits the potential for any serious offers.
      • Maintaining our UNDERPERFORM rating and 12-month price target of $45. We value domestic
      streaming at $15, domestic DVD at $20, and assign a speculative $10 option value to international
      streaming. Our price target is at risk if domestic streaming growth slows more than we have
      modeled, or if the domestic DVD segment loses more subscribers than we currently have modeled.
      • Risks to the attainment of our share price target include: a sudden increase in subscriber
      growth, declining competition from other movie rental competitors, lower than expected costs for
      content, technology development and deployment, and improving macroeconomic factors.

      Sentiment: Strong Sell

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